How to Record Automobile Benefits in Simply Accounting

Personal use of a company vehicle is taxable.

Personal use of a company vehicle is considered a taxable fringe benefit under the guidelines of the Internal Revenue Service (IRS). The employer is responsible for calculating this benefit and including it as part of the employee's taxable income and wages. The employer is also required to withhold income taxes, Social Security and Medicare related to this benefit. The IRS provides several valuation methods that the company can select to calculate the employee benefit. The payroll administrator is responsible for updating all tables and fields and for properly recording the benefit within Simply Accounting. Simply Accounting is accounting software designed for small businesses.

Instructions

1. Create a separate income line item so automobile benefits can be easily tracked and identified. Select "Setup" from the main menu. From the drop-down box, select "Settings." Under payroll, click on "Income." A screen will appear with columns labeled income, type and unit of measure. Select a line item that is not currently in use to use for employee automobile benefits. Type "Automobile" in the income column. Select "Benefit" in the income type column. Check the first three columns labeled Social Security, Medicare and tax withholding. Select "OK." Save your changes.

2. Record the automobile benefits for the employee. Select "Payroll Check Run" from the main menu. The payroll run journal screen will appear. Be sure the correct bank account is selected. Select the pay period start and end dates for the current pay period. Select the first employee to begin entering automobile benefits for the current period. Select the "Income" tab. Scroll down in the "other" field until you see the automobile benefit category. Enter the calculated benefit for the period. The taxes on the withholding, Social Security and Medicare benefits will automatically update. Continue to update all employees who have received automobile benefits then press "OK." Select all employees that will be paid for the current period by checking the first column on the payroll run journal screen. Select "Post" to run payroll.

3. Review your changes for accuracy. In the main menu, select "Reports" then "Payroll." Select "Employee" from the drop-down box then "All Employees." Click "OK." You will now see an up-to-date summary of all employee wages, deductions and taxes.

Tips & Warnings

• You are not required by the IRS to withhold income taxes from the employee. Inform the employee if income taxes are not being withheld so he can plan accordingly.

References

• Internal Revenue Service: Taxable fringe benefit guide (PDF)

Resources

• InternalRevenueService: Revenue procedure for employer provided vehicles